A QUARTER of high-net-worth (HNW) investors currently hold more than half of their wealth in cash, according to new research from Rathbone Investment Management.
Despite rock-bottom interest rates on cash savings, HNW investors – defined as those with more than £100,000 in investable assets – are still keeping the majority of their wealth in cash. The research found that 25 per cent of more than 1,500 people surveyed keep more than half their assets in cash, while 35 per cent keep between a quarter and a half in cash.
The main reason they gave was that cash is the ‘safest option’ and they fear taking any risk with their money but with inflation running at 2.1 per cent, the real value of these savings could in fact be eroded over time.
Those with smaller pots were also found to be heavily reliant on cash savings, with 46 per cent of people holding between £1,000 and £100,000 in investable assets keeping it in cash. This trend could be seen across age groups, with 31 per cent of under 35-year olds holding cash compared to 41 per cent of over 40s. This younger age group risks missing out on the great potential of compound interest to grow their money over their longer time horizon, Rathbones suggested.
“Cash remains king as investors remain cautious,” said Robert Szechenyi, investment director at the group.
“Despite the threat of low interest rates devaluing their wealth over the long term, investors still believe cash to be the safest option for their money. This is largely down to the economic and political uncertainty currently at play in the UK and wider afield.
“Investors are concerned about the impact that impending events such as Brexit will have on the markets and therefore are hesitant to invest a significant proportion of their wealth into the markets.
“However, it’s important to remember that investing is a long-term game, and to make the most of compounding staying in the market over a long period of time is the best way to access good returns.
“Ensuring that your investment portfolio is well-diversified across assets and regions will help to offset volatility. As a first step speak to an adviser about how you should best allocate your investments and how much cash you should be holding.”